The number of Fortune 100 companies now offering only defined contribution plans to new employees continues to rise, furthering the decline of traditional pension plans at the nation's largest corporations, according to a study from consulting firm Watson Wyatt.
The study found that 55 companies in the top 100 offer only defined contribution plans, up from 51 in 2008 and 46 the year before. As late as 1998, only one-tenth of Fortune 100 companies were defined contribution-only. And this comes at a time when 401(k)s--the main retirement savings vehicle for many Americans--were decimated during the recent market downturn.
"We're entering a new world for retirement benefits," said Alan Glickstein, senior retirement consultant at Watson Wyatt. "With many current and especially older workers still covered by closed or frozen pension plans, new and younger employees will be the first generation to rely on 401(k) plans exclusively for their retirement savings. It's a big burden for them to carry as recent events have made all too clear."
Fortune 100 companies now offer more hybrid pension plans, such as account-based cash balance plans (23 companies) than traditional defined benefit plans (22 companies).
According to Wyatt, cash balance plans reduce volatility and provide more visible benefits for employees than traditional pension plans. Participants in cash balance plans saw their pension accounts go up during the financial crisis versus declines in most 401(k) accounts.